The ongoing floods that have affected more than 59 provinces in Thailand have devastated huge swathes of agricultural land but the extremity of the floods have put more damaged industrial activity, including industrial estates and further potential flooding threatens more central locations causing greater disruptions to the supply chain, according to Colliers International Thailand.
While the floods have ravaged many parts of Thailand since August, relatively little damage to manufacturing was inflicted due to most factories being located away from initial flooding areas. However this changed on October 5th when water levels reached their highest point in living memory and Ayutthaya, home to significant manufacturing, was seriously affected. According to Narumon Rodsiravoraphat, Senior Manager for Industrial Services at Colliers, far greater damage was caused to industry in the last few days compared to the previous few months. “Over a hundred times greater financial loss to industry was incurred since 5th October due to severe damage to two industrial estates and two others have been evacuated in anticipation of flood waters reaching them”, said Narumon.

Many warehouses and distribution centres have been seriously affected especially in Ayutthaya area and along the main highway of Phahonyothin road which has become effectively the channel for water in the north to flow down to the central provinces. Over the course of the week further flooding is expected due to looming storms and industrial facilities in Pathumthani and Bangkok itself are now in danger.

According to Narumon, more than 500 factories have been forced to close during this situation and more than 100,000 workers have been affected from this crisis. “The damage from the flooding may be take up to two to three months to be accessed and rectified after the water level decreases as companies must take time for renovation of facilities as well as repair and re-operation of machinery”, she added.
The industrial market has picked up rapidly from 2010 and there has already been a shortage of warehouse space in some locations, especially good quality large space in Ayutthaya and some Bangna areas. Lamchabang, where there is strong demand for free zones, also seems short of supply. “Developers should understand more of the market demands and requirements in terms of specification, locations, layout, and general/free trade zones, etc. And we do hope that all new warehouse developments will all be raised floor”, said Narumon.
Although the initial reaction after the flood will be for the relocation of manufacturing, in reality manufacturers will remain rather sanguine according to Patima Jeerapaet, Managing Director of Colliers. “Many have invested significant amounts of money over time and they are just not going to walk away”, he said. “It also takes time to create a supplier network as well” he added. Patima also noted that serious damage was not limited to Thailand and the horrors of the flood are also evident in Cambodia, Philippines and Laos. “Manufacturers will be wary of relocating to countries with less reliable infrastructure to cope with floods and they may decide that Thailand is a better location than say Vietnam or Cambodia due to this fact. However new investment for manufacturing locations may be shifted towards non flooding areas in Thailand. All factories, distribution centers, and logistics companies also must create and work out their contingency plan well enough in advance”, said Patima.

One possible ramification could be the development of back up storage centres in locations upon higher ground that can protect goods from damage. “After the riots in 2010 many office occupiers considered back up locations and the same may now apply for industrial activity”, said Patima. However, unfortunately the flooding story has not run its course and a better assessment can be made in a week or so time. “We only hope that further damage is kept to a minimum”‘ added Patima.

With the ever growing inundation of Bangkok and exhausting uncertainties regarding the potential flooding situation in the centre of the city; even in the best case scenario the pattern for the residential market will be difficult to assess even after the floods have receded, according to real estate company Colliers International Thailand. For the rest of the quarter residential launches are very likely to remain subdued due to current sentiment and logistics. However unlike the post May 17 2010 situation, when buyers jumped straight into the market, many will probably be cautious about making such a big decision as a property purchase until the ongoing events have ended and an analysis of the flood is undertaken, according to Patima Jeerapaet, Managing Director of Colliers. “The full story will need to be known before buyers come rushing in again and developers will also need to reevaluate projects”, he said.

The decision as to whether to purchase landed property versus a high-rise condominium will likely be in favour of the latter due to the floods but even then people will evaluate which areas are less prone to floods. “Even if your high-rise home is protected you still don’t want the area inundated with flood water for weeks”, pointed out Mr Jeerapaet. However long the delays in buyers coming back in the market the pent up demand is likely to increase and eventually a significant number of launches will take place. According to Tony Picon, Associate Director at Colliers, condominiums will be even more popular than they were before the floods. “We are noticing that more older people and children are staying in condominiums at the moment and the reason is that the owners are using units as temporary accommodation for their extended families”, he said. In the aftermath of the floods many who were forced to evacuate to centres may rethink their options. “You could find families encouraging one of their number to purchase a condominium unit and even help in financing, as it would then function as a back-up residence”, pointed out Mr Picon.

At the high-income end of the market the same reasoning could add to the trend for purchasing second homes in resorts such as Hua Hin or Pattaya. “Many have fled to these resorts especially people who don’t need to work in Bangkok such as children and the elderly”, stated Monchai Orawongpaisan, Senior Manager for Residential Project Sales and Marketing. Again family pressure could result in more property being purchased not only as a weekend retreat but also as a back- up residence. “We could see significant activity in the market during the first half of next year based on this trend in Hua Hin, Pattaya and other nearby resorts”, he added.

While high rises will prove more popular, landed property will still remain a strong presence in the city. There are dire warnings of global warning leading to more regular flooding problems, including flash floods as a result of heavy downpours and a future trend could be simply opting for houses on stilts which reflected a common mode of living in the past. “Many countries have been affected by floods and stilt based housing is proving more popular with innovative designs coming to the fore which exclude the use of hardwood pilling”, said Mr Picon. The existence of such properties would also support the city in allowing water to run off quickly. “It is basically a way of accepting Mother Nature and living with it rather than trying to confront the situation “, he added.

Mr Picon pointed out that the problem for buyers finding locations that will be relatively safe from future floods is that effects can vary based on a number of factors. “Firstly, flooding is a combination of run-off from the north, heavy rains and high tides in November; and the impact of each differs for every flood leading to different geographical patterns of inundation “, said Mr Picon. The other variable is that the elaborate flood protection system for Bangkok is managed by politicians and administrators, and their priorities can change. “If the whole of Bangkok is inundated this time then buyers will face a big dilemma as to finding suitable locations in the future”, warned Mr Picon.

The past quarter was an active and fascinating one for the retail industry in Thailand with significant developments outside of Bangkok and a consolidation within the hypermarket sector according to the latest report from Colliers International Thailand.

Since the takeover of Carrefour by Big C at the end of 2010 there has been the process of rebranding with the obvious change in name but also the beginning of a differention of hypermarkets by the addition of “Extra” to a number of both Tesco Lotus and Big C stores. “Extra” stores will contain more F&B and entertainment options and be slightly more upmarket as a result. According to Patima Jeerapaet, Managing Director of Colliers in Thailand, the new duopoly that exists in this sector may be positive. “The intensive rivalry between Boeing and Airbus for example, has led to dramatic efficiencies in aircraft manufacturing because of economies of scale being combined with fierce competition and the same may be applied to the Tesco Lotus/Big C situation”, he said.

Nearly 340,000 sq m of new supply of retail centre space is expected to be completed by the end of 2011. Notable additions expected for the Christmas shopping season include Central Rama 9 with nearly 90,000 sq m of space in what many are considering an emerging business district. Terminal 21, by Asoke BTS station will supply 35,000 sq m and hasten the elongation of the main retail thoroughfare from the beginning of Rama I to the Emporium and new developments by Phrom Phong station. “In five years there will be an extended shopping corridor covering six BTS stations that will be very positive for residents but also for tourism”, added Mr Patima. He also looked forward to the reopening of the rest of CentralWorld in Chit Lom at the end of the year after the damage caused in 2010. “It will be a great symbol of Bangkok’s spirit in the face of adversity”, he added.

Two community malls opened in Q2 2011 in which one is “The Junction” on Ratchada – Ramindra by SC Asset Corporation, located in front of their own residential project .The other mall is “The City Viva” by Sun Global Asset Co., Ltd. which had its official grand opening on 24 May 2011 and is located on Narathiwas Rajanakarin. In fact the total area of community malls is expected to continue to increase and is estimated to be around 700,000 sq m by 2013 compared to 300,000 sq m in 2006. Antony Picon, Associate Director of Research at Colliers believes that community malls are becoming ubiquitous throughout Bangkok for good reason. “They cater for the needs of the growing condo community in the city and reduce the amount of car travel thus supporting the environment”, he said. Mr Picon also believes that the F&B component is vital for their success. “In many respects the community mall serves as a kind of focal point for new residential growth areas and so places to eat, drink and be entertained are a key component”, he pointed out. Mr Picon also mentioned that total area of community malls will match that of hypermarkets in a couple of years.

Occupancy levels and rental rates showed small gains q/q as the city shows continued signs of growing confidence and future stability after the elections could lead to even greater bullish sentiment. One of the interesting features is the expansion of Thailand’s retailers out of Bangkok and into the provinces and more importantly the region and the world. Central Group acquired La Rinascente, a leading department store in Italy which includes the iconic Piazza Duomo in Milan and the same company is making strides in China. Mr Picon is not surprised about Thailand’s retail giants spreading their wings. Due to the cooler weather, Europe’s retail experience is mostly centred in open air high streets and squares while the USA has the space for large but low level shopping malls. Constraints on land area and the tropical climate mean that tall air-conditioned retails centres are a dominant aspect of the retail market in Asia. “Developers have therefore significant challenges and also opportunities in Thailand’s cities and many have responded extremely well with very well designed malls that are able to drive shoppers up its many floors and thus command higher rentals throughout”, said Mr Picon. Mr Patima believes the retail sector can showcase the best that Thailand can offer. “Why not expand and show the world what we are made of? Our retailers can be global champions”, he remarked.

The community mall is starting to become ubiquitous in Bangkok and it is forecast that by 2013 the total area will match that of hypermarkets. Mass transit line extensions and the growth of small clustered residential areas in the suburbs means the requirement for some form of shopping complex that can serve the needs of the local community. These retail areas represent an ever growing presence on the Bangkok shopping scene.

The take up rate in the all areas in Q2 made slight gains from Q1. The first half of the year contains many excuses for spending such as the January New Year holiday, Chinese New Year, Songkran festival and “Back to School” events and is a strong period for the retail industry which often reflects itself in higher take up.

On June 24, 2011, Colliers International Thailand has contributed money, toys, gifts and clothing to Santisuk Foundation to give hope and encouragement to the children, to live their lives with dignity and quality and support their various activities that Santisuk Foundation set up on special occasions.

Colliers International Thailand, the leading property consultants, has expanded its Residential Project Sales & Marketing department, emphasizing excellence of service and one-stop consultancy.

Following on from the successful global rebranding at the end of 2010 and the award of Best Agent – Eastern Seaboard and Best Agent – Bangkok Highly Commended at the Thailand Property Awards in 2010, Colliers are taking a big step by significantly expanding its professional residential project sales department focusing on residential projects in Bangkok and in the resorts. In 2008, Colliers International Thailand opened a branch in Pattaya which is already a great success with a plan to open more branches in Hua Hin, Phuket and Samui.

“2011 is an important milestone for us a company. Colliers International is equipped with more manpower and we are expanding our residential operation by introducing a professional sales team who are experienced and highly skilled in project sales management.” said Patima Jeerapaet, Managing Director of Colliers.

Colliers International Thailand has appointed Monchai Orawongpaisan as the Senior Manager of the Residential Project Sales Department. He has extensive experience in project sales and the company has strengthened itself with experts to provide sales and marketing services for existing residential projects as well as future developments. Colliers has been appointed as agent for five projects in Bangkok and Hua Hin this year.

“It is another success for Colliers in being appointed to manage the sale of five projects for the first half of 2011. Our sales management concept does not involve only “sales” but offers a full range of services to empower the sale by providing consultancy on the project, competition, price range, target markets and recommended marketing activity,” said Mr Patima. “We expect to expand our customer base through our valuable services and that we will be handling more project sales in Bangkok and popular tourist destinations in the coming years,” Mr. Patima added.

Mr. Patima said. “The past few years have been difficult in terms of foreign demand for properties in Thailand. However, we are receiving more responses from our International Residential Sales Department of Colliers in Hong Kong and Singapore on behalf of their clients and we feel the market reached a bottom in 2009 and is now rebounding”.

Asia Pacific warehouse demand is expected to take a dip due to the impact on the regional trade after the March 11 earthquake and tsunami in Japan

May 2, 2011, Bangkok – Colliers International recently released the Global Industrial Highlights – Second Half 2010, with Asia Pacific emerging yet again as the most robust region, North America registering a pick-up in leasing activity while Europe, Middle East and Africa (EMEA) reported a modest growth.

In terms of warehouse rental, Tokyo topped the world at USD 22.56 as of end 2010. This is followed by London – Heathrow, Zurich, Hong Kong and Geneva – the global top five industrial warehouse rentals.

Asia PacificIn the second half of 2010, exports in many countries posted encouraging growth rates, with healthy economic growth in the region and exporters boosting sales both within the region and globally. Asia Pacific continued to be the world’s most robust region. Across most markets in Asia Pacific, warehouse rentals were steady or in upward swing. Tokyo’s warehouse rentals were the highest at the end of 2010, followed by Hong Kong and Singapore at the 4th and 7th spot respectively.

Thailand witnessed a continued surge in industrial estate activity over the course of 2010 with an additional supply of 8,914 rai (3,523 acres) of Serviced Industrial Land Plots being added to the market.

However, with Japan’s devastating earthquake on March 2011, trade across the region will feel some effects with demand for warehouse space in the region expected to be sluggish compared to 2010. Disruptions in the supply chain have been felt in Thailand, a strong manufacturing base for Japanese companies. However over the medium and long term Thailand is expected to benefit as Japanese multinationals consider moving more production away from its own shores.

North AmericaBoth the United States and Canadian warehouse market registered a noticeable pick-up in the second half of 2010. Warehouse demand in the United States was concentrated in a number of port-related markets, while in Canada, most markets recorded a fairly brisk period in the second half of 2010. Meanwhile, with a return of demand and continued drop-off in construction, vacancies in Canada and the United States decreased.

Amid signs of economic recovery in both countries, occupancy gains are expected to be sizeable in 2011 given healthy gains in manufacturing and a continued bounce-back in consumer spending. However, rentals are expected to remain largely directionless this year. Taking the second half of 2010 as an example, rental in United States fell 2.9% while those in Canada increased marginally by 0.2%.

EMEAIn EMEA, various markets were characterised by sluggish leasing activity and little expansion. Warehouse rentals again kept steady in the second half of 2010, similar to the first six months in the year, although Europe is home to some of the most expensive warehouse rentals in the world. For example, London – Heathrow, Zurich and Geneva were included in the top five most expensive warehouse rentals in the world.

London – Heathrow not only registered the most expensive warehouse rentals in EMEA, its prime industrial land prices at USD 56.82 per sq ft was the highest in the region and remained far in excess of any other markets in EMEA.